Federal government largest driver of income inequality?

posted at 3:31 pm on December 23, 2012 by Ed Morrissey

I missed this when Reuters reported on it earlier this week, but it’s worth a close look. The scourge of income inequality has been the focus of Democratic politics since at least September 2011, when Barack Obama began demanding higher tax rates on the wealthy in order to achieve “fairness.” Obama and his party have played class-warfare games ever since, playong footsie for a while with the Occupy Movement, until the stories of abuse, criminality, and weirdness got to be too damaging. All the while, the Democrats have insisted that they are fighting income inequality, and that we need more government spending to eliminate it.

In their “Unequal State of America” series, though, Reuters discovers the epicenter of income inequality — and it’s right where all that federal spending starts:

In the town that launched the War on Poverty 48 years ago, the poor are getting poorer despite the government’s help. And the rich are getting richer because of it.

The top 5 percent of households in Washington, D.C., made more than $500,000 on average last year, while the bottom 20 percent earned less than $9,500 – a ratio of 54 to 1.

That gap is up from 39 to 1 two decades ago. It’s wider than in any of the 50 states and all but two major cities. This at a time when income inequality in the United States as a whole has risen to levels last seen in the years before the Great Depression. …

The federal government does redistribute wealth down to struggling Americans. But in the years since President Lyndon Johnson took aim at poverty in his first State of the Union address, there has been an increasingly strong crosscurrent: The government is redistributing wealth up, too – especially in the nation’s capital.

Why might that be? This is one good reason:

Roughly 15 cents of every dollar from the entire federal procurement budget stays in or around the government’s hometown, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. Last year, that was about $80 billion out of $536 billion in procurement spending, he said. The 15 percent share is far greater than the region’s 2 percent portion of the U.S. population.

“We’re seeing an enormous transfer of wealth from taxpayers to the Washington economy,” said Fuller.

And if you want to know how it works, this paragraph explains it pretty thoroughly:

Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. The federal government funneled $83.5 billion their way in defense and other work in 2010 – an increase of more than 300 percent since 1989, even after adjusting for inflation. Private industry poured more than $3 billion into lobbying to influence the government, nearly double what it spent a decade ago.

Like spokes on a wheel, the high-rise offices of this elite radiate out from Capitol Hill along major arteries deep into suburban Maryland and Virginia. The latest Census figures placed 10 of the capital’s surrounding counties in the top 20 nationwide for median household income – up from six in 1990.

The more regulation and spending expands, the richer Washington gets. With those incentives in place, is there any wonder why Washington is reluctant even to cut the rate of growth in spending? Anyone? Anyone? Bueller? Bueller?

The article is worth a full read, even if it somehow conflates tax cuts with redistribution in a weak attempt to apply a pox-upon-all-houses editorial tenor. Tax cuts only represent redistribution if one believes that no one earns their own income, but that it’s a gift from Uncle Sam. That’s the kind of thinking that created the Inequality Capital in the first place. Still, the report overall makes it very clear that Washington is the driver of regional income inequality and a major contributor to personal income inequality, and that the federal government’s policies and regulations make the problem worse rather than better.

Note: The front-page cartoon originated a while back from the excellent site Cagle Cartoons.

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Still, the report overall makes it very clear that Washington is the driver of regional income inequality and a major contributor to personal income inequality, and that the federal government’s policies and regulations make the problem worse rather than better.

Hey it’s all Obama money….out of his stash… and the report is racist
;-)

I have a sibling who is a realtor in the DC area. A few years ago, maybe sold one or two homes around $1million or so each year. Now sells several at a much higher value each year. Can’t get enough of them on the market to satisfy the demand.

Federalism. Elect strong, 10th Amendment conservatives to state offices who will seize power back from DC. Stop sending money to DC just to have it washed through the bureaucracy and sent back with strings attached.

The more regulation and spending expands, the richer Washington gets. With those incentives in place, is there any wonder why Washington is reluctant even to cut the rate of growth in spending? Anyone? Anyone? Bueller? Bueller?

I seem to remember from Geography 101 in college (and I am also “Highly Qualified” per NCLB) that when the political capital has a concentration of economic wealth, you might be in a third world country.

The article is worth a full read, even if it somehow conflates tax cuts with redistribution in a weak attempt to apply a pox-upon-all-houses editorial tenor.

still, let’s give it a look.

Last year, two nonpartisan government bodies, the Congressional Budget Office and the Congressional Research Service, each undertook studies of income inequality for lawmakers. Both concluded that a major driver in the years leading up to the recession was the growth in capital gains among top earners – but that the cuts also reduced the equalizing influence of the income-tax system. The 2011 CRS paper said tax cuts were the second-largest contributor to the rise in inequality in the decade through 2006.
…
There is no serious disagreement that the rich saved far more on taxes than any other group relative to their incomes, however.

Well the feds are doing something? If you don’t think this government is sol just look at this? bho want’s illegal aliens here, but goes after companies that hire illegal aliens and get huge fines from said companies? So where do the illegal aliens get money from? The feds pay for food, schools, housing, medical, prisions for those who rape/kill US citizens? BUT, you can not deport the illegal aliens, you have to care for the entire life of an illegal aliens baby and family members!

I missed this when Reuters reported on it earlier this week, but it’s worth a close look. The scourge of income inequality has been the focus of Democratic politics since at least September 2011, when Barack Obama began demanding higher tax rates on the wealthy in order to achieve “fairness.”
============================

The Hopey/Changey NeverEnding War, from Social Justice Crusader in Chief!

Choosing Losers.
Choosing to give our tax money to crony phony green-energy ‘front’ companies that ‘lose’ our money.
Choosing to violate and subvert contract and investing law and put investors at the BACK of the line when they rendered GM.
Choosing to bankrupt GOP-donor GM dealers, forcing them out of business.
Choosing to promulgate phony ‘global warming’ -driven environmental policies to kill the engines of capitalism, coal-powered anything, diesel trucking, “wetlands” property owners.
Choosing to shutter US gulf oil-drillers (while simultaneously giving taxpayer money to Mexico adn Brasil’s state-owned oil companies to drill in the gulf).
Choosing not to prosecute vote fraud that benefits democrats.
Choosing to force religious organizations to give material support to abortion.
Choosing to force a level of expense on small businesses that force them to lay off employees or drastically cut their hours.
Choosing to support arm adn fight on behalf of several murderous islamist movements in several arab states, such that non-muslims are scourged like they haven’t been since the second wave of the Jihad in the 1400s
Dialectic Marxists, Choosing Losers.

On Hussien the US Destroyer,good point,but it appears by
the Commanders own hand,..ugh!:)

canopfor on December 23, 2012 at 4:59 PM

There are just too many ” coincidences” linking dead Navy SEALS and Hussein. It seems like they are being eliminated just for being what they are :( :(
We’ve had wars before, SEALS have done stuff before, but they’ve never been so selctively ‘removed’ after being outed by the media and hollywood.
I pray for the safety of our men and women in uniform , or as Kerry and Ayers call them –enemies.

There are just too many ” coincidences” linking dead Navy SEALS and Hussein. It seems like they are being eliminated just for being what they are :( :(
We’ve had wars before, SEALS have done stuff before, but they’ve never been so selctively ‘removed’ after being outed by the media and hollywood.
I pray for the safety of our men and women in uniform , or as Kerry and Ayers call them –enemies.

There are just too many ” coincidences” linking dead Navy SEALS and Hussein. It seems like they are being eliminated just for being what they are :( :(
We’ve had wars before, SEALS have done stuff before, but they’ve never been so selctively ‘removed’ after being outed by the media and hollywood.
I pray for the safety of our men and women in uniform , or as Kerry and Ayers call them –enemies.

burrata on December 23, 2012 at 5:34 PM

“Mabus”

Lourdes on December 23, 2012 at 7:09 PM

@canopfor and burrata, I didn’t mean you as to “Mabus,” but as to the, uhh, condition you cite there.

Roughly 15 cents of every dollar from the entire federal procurement budget stays in or around the government’s hometown, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. Last year, that was about $80 billion out of $536 billion in procurement spending, he said. The 15 percent share is far greater than the region’s 2 percent portion of the U.S. population.

Perhaps more importantly, who benefits from the 85% of that $536 Billion that does make it out of Washington? Here’s a hint: a person spends, say, $6 with an EBT card at McDonalds (but could be a number of vendors) and gets maybe 50 cents worth of actual food ingredients. No sales tax is collected, so McDonald’s collects the rest for processing, preparing and serving the 50 cents worth of food. Which is the real beneficiary, the poor person or the restaurant and its chain of suppliers and deliveries?

In today’s economy, the poor and the elderly, along with public employees and government contractors, are conduits for the redistribution of wealth taxed from the rich and for money borrowed of the Fed’s press, in a mad effort to levitate the nation’s economy. The individual recipients are just window dressing for a several-hundred-billion-dollar always-on economic stimulus.

In today’s economy, the poor and the elderly, along with public employees and government contractors, are conduits for the redistribution of wealth taxed from the rich and for money borrowed of the Fed’s press, in a mad effort to levitate the nation’s economy. The individual recipients are just window dressing for a several-hundred-billion-dollar always-on economic stimulus.

shuzilla on December 23, 2012 at 8:12 PM

Dialectic Marxists, Choosing Losers.

rayra on December 23, 2012 at 5:07 PM

You Both Missed Diploma Mills

You missed the everlasting selling, subsidy and coddling of our Educational Carnival. I am constantly finding kids and young people with enormous debt from programs in institutions with little or no entrance standards, nonsense majors and unmarketable skills after graduation.

Note how easy the left makes it for their pigeons to get loans to hand the public servant’s money. Ask Ann Coulter who are the most violent opponents of her right to speak on college campuses.

Then take a guess at the politics and the hallowed career path discussed in the classroom. College educated people are programmed to love the left. The price of the product explodes, the lefty workers do well, the finished product is meretricious and little is said.

It is like US cars were in the 70’s and 80’s. The difference is nobody is coming to compete with them or even look at the program as a consumer. The POTUS and every responsible party is seeing the same mirage.

Flooding the blue-collar labor market with millions of tired, poor unskilled, uneducated, amnestied illegal foreign workers doesn’t help with income inequality either. Obamacrats don’t really care about working class citizens as much as they care about importing Democrat votes.